The Massachusetts Supreme Judicial Court ruled that 7-Eleven franchisees are exempt from the worker classification test.
Retained by DLA Piper
In September 2024, the Massachusetts Supreme Judicial Court ended the long legal battle between 7-Eleven and its franchisees, who claimed they are employees of the chain. The court found, in a unanimous decision, that franchisees do not perform a service for 7-Eleven, and therefore do not meet the threshold that would trigger application of the state’s strict test for worker classification.
7-Eleven’s counsel retained Cornerstone Research to support Francine Lafontaine of the University of Michigan to provide an economic analysis of the franchise business model and the relationship between 7-Eleven and its franchisees. Professor Lafontaine opined that 7-Eleven provides services to its franchisees and not the other way around, and this is reflected in the flow of payments from franchisees to 7-Eleven.
The decision in Patel v. 7-Eleven may have broad implications for maintaining the franchise model.
Plaintiffs claimed that they should be considered as 7-Eleven’s employees under Massachusetts state law because of the controls that the company exercises over them, including obligations to carry certain products, use certain suppliers, or maintain certain opening hours. After the district court dismissed the case in 2022, the Massachusetts Supreme Judicial Court was asked to opine on whether plaintiffs perform any services for 7-Eleven.
In her affidavit, Professor Lafontaine explained the economics of the business format franchise model. This model allows retail business owners (the franchisees) to run their business more effectively by benefiting from services provided by the franchisor such as a strong brand, centralized advertising services, or more favorable purchasing terms. Consistent with this, franchisees make payments to the franchisor (and not vice versa). In its decision, the court cited Professor Lafontaine’s analysis on how 7-Eleven provides value to franchisees’ businesses by protecting the brand’s value, in part by enforcing quality standards across the franchise system.
The case was considered by some in the business community to risk upending franchising in Massachusetts and cause harm to workers and the broader economy. For example, the U.S. Chamber of Commerce filed an amicus brief claiming that the plaintiffs’ proposed approach for assessing worker classification would disrupt or threaten scores of business models.
The court found that the franchisees do not perform a service for 7-Eleven, and thus the plaintiffs do not meet the threshold necessary to trigger application of the worker classification test. This decision puts an end to the seven-year-long class action lawsuit.